Gas Prices Could Exceed $4 per Gallon Next Year: GasBuddy

Gas prices hit well beyond $7 per gallon at gas stations in Los Angeles, Calif., on June 22, 2022. Frederic J. Brown/AFP via Getty Images

U.S. average gas prices could cross $4 per gallon by next year, according to a forecast by GasBuddy, which also did not rule out prices hitting $5 per gallon by summer.

The year “2023 is not going to be a cakewalk for motorists. It could be expensive,” Patrick De Haan, head of petroleum analysis at GasBuddy, told CNN. “The national average could breach $4 a gallon as early as May—and that’s something that could last through much of the summer driving season.” The national average gas price was $3.13 per gallon as of Dec. 18. GasBuddy expects it to rise to $3.52 to $4.05 per gallon by May.

Gas prices in America usually tend to rise heading into the summer as more people get on the road during this time.

Moreover, refiners switch over to summer-grade gasoline, which costs more. GasBuddy forecasts the national average to hit a high of $4.25 per gallon by August 2023, and then decline toward $3 per gallon by the year-end.

As to whether gas prices might hit $5 per gallon in the summer, DeHaan does not rule it out. “It’s not impossible,” he said, “merely improbable at this moment.”

DeHaan pointed out that the markets this year were hit by “extreme amounts of volatility.” Gas prices had crossed $5 per gallon in June following uncertainty created by the Russia–Ukraine conflict.

In addition, China’s strict COVID-19 lockdowns, worries about big rate hikes by the Federal Reserve, and fears of a recession contributed to the upward pressure in prices.

EIA, Oil Predictions

The U.S. Energy Information Administration (EIA) is expecting retail gasoline prices to average $3.50 per gallon in 2023, which is down from $3.99 per gallon in 2022, but higher than $3.02 per gallon in 2021.

In a report, the agency noted that U.S. retail gasoline prices hit their lowest price since February by the end of November due to high refinery utilization and falling demand that contributed to rising gasoline inventories.

“As refiners maintain high utilization in response to high distillate margins, we expect this trend to continue and for gasoline inventories to reach five-year average levels in 2023, limiting upward pressure on gasoline prices,” it said.

Meanwhile, global oil prices are expected to spike higher next year. Bank of America (BofA) calculates Brent prices, which were trading around $84 per barrel as of Dec. 28 5:36 p.m. EST, to average $100 per barrel in 2023, according to Reuters.

Factors like a million barrel-per-day drop in Russian oil supplies and recovery in Chinese oil demand are foreseen to drive prices to this level. BofA pointed out that its oil price forecasts “rely heavily” on robust demand from China and India, failing which the expected price trajectory could be affected.

Price Rise Under Biden

The Biden administration has been criticized for being unable to rein in gas prices. Since Joe Biden became president, the price of retail gas in the country rose from $2.46 per gallon to $3.20 per gallon as of Dec. 26, which is an increase of 30 percent.

Since hitting its peak of $5.10 per gallon in June, retail gas prices have fallen by 37 percent. Some credit the Biden administration for the fall.

However, in an article at Yahoo, senior columnist Rick Newman points out that the biggest reason behind declining oil and gas prices in recent times has been China’s strict COVID-19 lockdowns.

China is the largest energy consumer and the second-largest oil consumer. As such, the lockdowns have affected oil usage and demand.

Newman cited a report by S&P Global Commodities which also credited Beijing’s COVID-19 policy as being the “most important fundamental factor” driving energy markets.

Chinese energy imports were weaker in 2022, without which prices of all commodities would have “undoubtedly” been higher, S&P stated.